Don’t Let Your Payment Service Provider Freeze Your Cash
August 27, 2014
Who wouldn’t want to open an online vape store? Seems like everywhere you turn these days, a new website has popped up. There is a very high demand to be met in this market, so even though there is a good amount of competition, there seems to be enough business to go around. In fact, the numbers are pretty staggering: in 2013, eCigs became a two-billion dollar industry. But there is trouble in paradise for some.
Third party PSPs (payment service providers) like PayPal, Inuit, Square, and Stripe are coming down hard on vape businesses – auditing their accounts and shutting them down with little or no warning.
This, of course, comes as a huge shock to business owners because they believe they are doing everything right. Then out of the blue, disaster strikes, customers are angry, cash account are frozen, and everything goes to hell in a hand basket. Unfortunately, many business owners don’t bother to read the fine print of the PSP’s terms and conditions. While eCigarettes and vape products are not tobacco (and in fact are crucial to help some people stop smoking real cigarettes), those organizations don’t see it that way.
“I have heard stories about businesses having their processing systems frozen,” says Rocky Anciano, Founder of The Vape Summit. “One business I know had nearly $50,000 frozen for three months.”
Rocky is not the only one. Go on any Facebook or Reddit forum about the industry and you’ll hear countless horror stories. For instance, Paypal froze Vapetropolis’ account claiming that they do not process payments for vaporizers. Up until that point, the company had steady sales and are now struggling to get the same level they had. Pitbull Vape Juice couldn’t have a Black Friday sale last November, because Paypal froze their account too! Owners of vape shops are understandably outraged. “Intuit is setting rules based on laws and regulations that do not apply in any way to this industry,” says Cyclops Vapor on Facebook. “There are no deeming regulations on eliquid, ecig supplies, accessories, or devices within the United States. Our products are not classified as tobacco products. They contain no tobacco.”
Nonetheless, it doesn’t look like any of these rules will change any time soon. Do not let this craziness effect your business! If you’re using a PSP now, you should minimize the amount of cash you keep in that account. Realize that accounts can be suspended and frozen with short notice. Only a merchant account from a merchant service provider that specializes in vape can provide true peace of mind.